Record debt for graduates in the class of 2016, most of them student loan borrowers, is a terrible way to start their careers. This year’s magic number is $37,172 - among the roughly 70 percent of students who will graduate with loans, that’s the average amount of debt they have.
The figures reported are from an analysis report conducted by Mark Kantrowitz, a higher education and student loan debt expert, USA Today reports. Like other, similar analyses, Kantrowitz’s estimates of average education debt have gone up with every new graduating class for more than a decade.
With the record debt for graduates in 2016, there’s little reason to believe the class of 2017 would be an exception to this unpleasant trend. Wages haven’t kept pace with growing student loan debt (though the starting salary for college grads has gone up recently), but regardless of what their first jobs end up paying, borrowers have to find a way to stay on top of their loans.
“So long as your total student loan debt at graduation is less than your annual starting salary, you’ll be able to repay your student loans in 10 years or less,” Kantrowitz said. “But some students vary from these averages, enrolling in more expensive colleges and pursuing careers that are less financially rewarding. But this is more a matter of choice than necessity. The key is to keep your debt in sync with your income.”
Considering that a person’s ability to repay student loan debt has a significant bearing on their credit scores, and as a result, their financial future, this ever-climbing average debt figure can be really scary for future students. Some high school students are chasing not to attend their dream schools because of the debt they’ll have to take on to complete their education, the Green Bay Press-Gazette reported.
Ideally, students can find a way to minimize their debts by choosing cheaper schools, finding scholarships, earning college credit in high school or working to pay some education expenses, but even those strategies often aren’t enough to pay for college without student loans. No matter what your student loan situation looks like, keep in mind that there are some repayment options that might make your debt more manageable.
The class of 2016 will enter a job market that continues to suffer from higher levels of unemployment for young Americans and relatively stagnant wage trends, according to a study from left-leaning Economic Policy Institute last month. The percentage of recent grads who are “idled” — meaning neither employed nor in school — is about 10 percent now, up from 8.4 percent in 2007.
There’s some good news for the record debt for graduates, however: Starting salaries are on the rise again. The figure for new grads with undergraduate degrees was $43,000 last year, or 7.5 percent higher than in 2014, according to the Federal Reserve Bank of New York. That may provide some reassurance to students and their parents about whether taking on so much debt will pay off.
Taking on debt of $100,000 to pursue a career that only pays $25,000 annually may not be a wise financial choice. And while the economy has improved since the Great Recession ended, it’s still not back to precrisis levels.
The International Business Times said that record debt for graduates in the class of 2016 does put them on the path toward greater financial stability than holding just a high school diploma. Recent college graduates have an unemployment rate of 5.6 percent, compared with 17.9 percent for high-school grads. And lifetime earnings are typically higher for college grads than for their counterparts who lack a degree.